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Pound steady in advance of potential 3rd meaningful vote

By Alex Edwards

GBP/USD has traded a narrow range over the last few trading sessions. And as ever, direction continues to be and will be hugely influenced by Brexit related rhetoric and headlines. Investors now await the result of a potential third meaningful vote on Tuesday evening although Chancellor Hammond has indicated that this would only happen if the Government has a ‘high degree of confidence’ of it passing. At this stage, it doesn’t sound like parliament will be voting on anything too different from last week, but it could still win more votes as May has warned MPs that a further defeat could lead to a long delay to Britain’s withdrawal from the EU.

Investors will also have half an eye on UK economic data this week, including average earnings data and employment on Tuesday, inflation on Wednesday and the Bank of England’s Monetary Policy Statement on Thursday. It all makes for another potentially volatile week ahead for the pound.

The dollar was generally well bid on Friday and finished the week on a stronger note, albeit fundamentals including data, didn’t have too much of an impact.

Eyes now turn to the FOMC talks scheduled for Thursday. The US central bank will release their Economic Projections, Statement, Federal Funds Rate and hold a press conference. These will show a projection for inflation and economic growth over the next 2 years, as well as contain an outcome of the vote on interest rates and other policy measures. No change in rates is expected. Fed Chair Powell previously indicated that the Fed would take a “patient” stance as it assesses cross currents. Since those statements, the economic data has been mixed.

EUR/USD was sold off in the early New York session on Friday but found good support close to and just under the big 1.13 figure. As the session progressed, EUR/USD recovered, and it opens slightly higher this morning at 1.1345.

There isn’t much by way of European data this week – focus for traders will likely remain on Brexit related headlines.

The Australian dollar edged higher through trade on Friday and overnight, moving toward the upper end of the weekly range. With little of note on the domestic calendar the AUD was buoyed by broader USD weakness as the world’s base currency suffered its worst weekly decline this year.

AU/USD opens just above .7100 in London this morning. Attentions this week turn to Thursday’s employment data - with the RBA recently doubling down on the importance of the labour market as a driver of future growth, a downturn in employment will amplify calls for the RBA to cut rates before the year is out.

USD/CAD rallied on Friday as oil prices dropped early in the session, this on the back of rumours of Iran sanction waivers. Despite

Canadian Manufacturing Sales then printed better than market expectations in the afternoon, and the CAD regained some poise come then end of the week. USD/CAD opens this morning at 1.3320.

The New Zealand dollar advanced higher through trade on Friday, boosted by an increase in Business NZ Manufacturing released early morning. Opening at 0.6825, the kiwi moved 20 points higher by mid-morning as data showed the manufacturing sector remained in expansion mode with steady construction sales.

This week, traders await the release of Westpac Consumer Sentiment on Tuesday and 4th quarter GDP on Thursday.